Cashback on the cards at Whitbread

LEISURE giant Whitbread, which owns Marriott Hotels, David Lloyd Leisure and Costa Coffee, is planning to return hundred of millions of pounds to shareholders.

The FTSE 100 company is expected to announce pre-tax profits of between £140 million and £144m at its interim results on Thursday and is in the process of selling assets that could raise as much as £500m.

Sources close to the company say that the board, headed by new chief executive Alan Parker, is not keen on using the money raised to pay off some of its £1.35bn debt as the company is comfortable with its current level of borrowing.

Any future organic growth will be paid for by cashflow, so the company is likely to return the extra money to investors via a shares buyback.

Whitbread is selling its Courtyard Marriott hotels for an estimated £80m and is expected to follow hotel rival InterContinental Group by selling off some of its hotel assets, which should raise at least a further £200m. It will then be run as a management operation.

The sale of drinks company-Britvic, which Whitbread owns jointly with InterContinental, PepsiCo and Allied Domecq, is likely to raise a further £200m, and Parker is expected to sell off several of the restaurant assets.

However, questions remain about the size of the return.

A Whitbread source said: 'Half a billion is a very punchy sum, but obviously there are several factors, such as the Britvic sale, that are beyond our control and which would affect our ability to announce a return of cash to shareholders.'

But some analysts feel that Parker should instead reduce the company's debt burden, recently boosted by the acquisition of budget travel chain Premier Lodge.